ON THE PRESERVATION OF DETERMINISTIC CYCLES WHEN SOME AGENTS PERCEIVETHEM TO BE RANDOM FLUCTUATIONS

Some recent equilibrium models give rise to complex but deterministic fluctuations. We modify the hypothesis of universal perfect foresight by injecting into the economy a nonnegligible fraction of less informe d agents who optimize their expected utility with respect to the stati stical distribution of prices in the deterministic dynamics. For the s tandard overlapping generations model with money (the 'Samuelson' case ) it is proved that if the fraction of consumers with limited knowledg e is sufficiently high, then all equilibrium cycles of period k greate r-than-or-equal-to 2 disappear. The global properties of the case of 2 -cycles are studied in detail. A brief analysis of the 'classical' cas e is also given.